The antitrust landscape in the United States is set to get tougher on large tech companies. On February 4, 2021, Senator Amy Klobuchar of Minnesota introduced the Competition and Antitrust Law Enforcement Reform Act (CALERA). If passed, this legislation would transform the federal antitrust laws.
Google, Facebook, Amazon, and other big tech companies have been facing heightened scrutiny for antitrust violations and market monopolization. The introduction of this bill combined with the Biden administration’s increased focus on antitrust reform is likely to create new challenges for tech companies.
Components of the Law
The proposed legislation would have a sweeping impact on companies doing business in the United States. Among other things, the Competition and Antitrust Law Enforcement Reform Act would strengthen pre-merger review, introduce new categories of prohibited conduct, increase civil monetary penalties, lower the barriers for plaintiff lawsuits to move forward, and increase whistleblower protections.
One of the most notable impacts of the law would be on pre-merger review. Under current U.S. laws, the government bears the burden of demonstrating that a given merger does not pose an “appreciable risk” of creating market monopolization or other anticompetitive effects. The proposed legislation would shift that burden of proof to the merging parties in certain cases. For instance, if one of the companies in the merger has a 50% or more market share and the other company in the merger is a competitor, the transaction would be subject to the shifted burden of proof.
The expanded scope of prohibited exclusionary conduct under CALERA also is particularly notable. Exclusionary conduct is broadly defined as behavior that “materially disadvantages one or more actual or potential competitors” or “tends to foreclose or limit the ability or incentive of one or more actual or potential competitors to compete.” The expanded definition would likely create new plaintiff lawsuit opportunities against companies.
Big Tech Lawsuits
Allegations of anticompetitive practices have been targeting big tech companies with increasing frequency. Government officials have been looking into possible antitrust issues and exploring enforcement options.
In October 2020, the Department of Justice (DOJ) filed a civil antitrust lawsuit against Google. The DOJ lawsuit claims that Google, which controls over 90% of the search and search advertising market, uses anticompetitive tactics to solidify its dominance. Attorney Generals from 11 states — Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas — also participated in the lawsuit.
“Today, millions of Americans rely on the Internet and online platforms for their daily lives. Competition in this industry is vitally important,” stated Attorney General William Barr. He further commented that the lawsuit against Google, “is a monumental case both for the Department of Justice and for the American people.”
In December 2020, Facebook was sued by the Federal Trade Commission (FTC) for illegal monopolization practices. The FTC is seeking a permanent injunction in federal court. Such an action would attempt to block Facebook from further integrating apps. There is concern that Facebook’s push for cross-platform interoperability, especially with respect to Facebook’s messaging ecosystem, promotes anticompetitive behavior. The FTC might also require divestiture of certain key assets, such as Instagram or WhatsApp.
Reforming Antitrust Laws
Senator Klobuchar has been spearheading efforts to reform the federal antitrust laws. She chairs the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights. Klobuchar’s efforts follow years of bipartisan scrutiny of monopolistic behavior amongst tech giants.
“While the United States once had some of the most effective antitrust laws in the world, our economy today faces a massive competition problem. We can no longer sweep this issue under the rug and hope our existing laws are adequate,” states Senator Klobuchar.
The idea of taking a tougher stance on tech regulation has garnered bipartisan support. Senator Mike Lee, a Republican from Utah, described CALERA as “Senator Klobuchar’s opening contribution to this bipartisan discussion.”
That sentiment has been echoed by others in the Biden administration. The nomination of Lina Khan as head of the Federal Trade Commission portends heavier tech regulation ahead. Khan published a legal paper titled the “Amazon Antitrust Paradox” that quickly sparked the interest of tech critics.
At 32 years old, Ms. Khan would be the youngest person to ever led the FTC. Despite the bipartisan support for ramping up antitrust enforcement of tech giants, many see Ms. Khan’s ideas as too extreme. Senator Lee called her nomination “deeply concerning” and noted that “her views on antitrust enforcement are wildly out of step with a prudent approach to the law.”
An Antitrust Makeover is Coming
If lawmakers are able to find consensus, U.S. antitrust laws could undergo their biggest makeover in decades. The bipartisan interest in antitrust reforms increases the likelihood of legislation being passed. Both parties have expressed concern about the power tech firms weld over American society. The ultimate challenge will be in achieving political consensus.